nep-gth New Economics Papers
on Game Theory
Issue of 2018‒03‒19
fourteen papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Intuitive Solutions in Game Representations: The Shapley Value Revisited By Pradeep Dubey
  2. Collusion and bargaining in asymmetric cournot duopoly: An experiment By Fischer, Christian; Normann, Hans-Theo
  3. Competitive screening and information transmission By Bó, Inácio Guerberoff Lanari; Ko, Chiu Yu
  4. Bargaining Foundation for Ratio Equilibrium in Public Good Economies By Anne Van den Nouweland; Agnieszka Rusinowska
  5. Opinion formation and targeting when persuaders have extreme and centrist opinions By Agnieszka Rusinowska; Akylai Taalaibekova
  7. Assignment maximization By Afacan, Mustafa Oğuz; Bó, Inácio Guerberoff Lanari; Turhan, Bertan
  8. 3 Persons, 2 Cuts: A Maximin Envy-Free and a Maximally Equitable Cake-Cutting Algorithm By Brams, Steven; Landweber, Peter
  9. Targeted Search in Matching Markets By Paulina Restrepo-Echavarria; Antonella Tutino; Anton Cheremukhin
  10. Allocating the costs of cleaning a river; estimating responsibilities versus incentive compatibility By Jorge Alcalde-Unzu; Maria Gomez-Rua; Elena Molis
  11. The Principle of Minimum Differentiation Revisited: Return of the Median Voter * By Nobuyuki Hanaki; Emily Tanimura; Nicolaas Vriend
  12. Social Capital and the Status Externality By Jun-ichi Itaya; Chris Tsoukis
  13. Contagion and information frictions in emerging markets: the role of joint signals By Avdiu, Besart; Gruhle, Tobias
  14. Group Punishments without Commitment By Benjamin Tengelsen; Ariel Zetlin-Jones; Emilio Bisetti

  1. By: Pradeep Dubey
    Abstract: We show that any transferable utility game can be represented by an assignment of facilities to the players, in which it is intuitively obvious how to allocate the total cost of the facilities. The intuitive solution in the representation turns out to be the Shapley value of the game.
    Date: 2018
  2. By: Fischer, Christian; Normann, Hans-Theo
    Abstract: In asymmetric dilemma games without side payments, players face involved cooperation and bargaining problems. The maximization of joint profits is implausible, players disagree on the collusive action, and the outcome is often inefficient. For the example of a Cournot duopoly with asymmetric cost, we investigate experimentally how players cooperate (collude implicitly and explicitly), if at all, in such games. We find that, without communication, players fail to cooperate and essentially play the static Nash equilibrium, confirming previous results. With communication, inefficient firms gain at the expense of efficient ones. When the role of the efficient firm is earned in a contest, the efficient firm earns higher profits than when this role is randomly allocated. Bargaining solutions do not satisfactorily predict collusive outcomes. Finally, when given the choice to talk, the efficient firms often decline that option.
    Keywords: asymmetries,bargaining,cartels,communication,Cournot,earned role,experiments
    JEL: C7 C9 L4 L41
    Date: 2018
  3. By: Bó, Inácio Guerberoff Lanari; Ko, Chiu Yu
    Abstract: We consider a simple model of the competitive screening of students by schools and colleges. Students apply to schools which then perform costly screening procedures of the applicants to select those with high ability. Students who receive more than one offer may choose among those. Colleges select students and can observe the school which they attended. We show a channel through which students' preferences affect schools' screening decisions and outcomes: as schools increase the screening for high-ability students, a greater proportion of them is identified as such by multiple schools and are able to select one among them to attend. Schools' marginal gains from screening therefore depend on other schools' screenings and students' preferences. By focusing on the schools' screening choices (instead of the students' application decisions), we show how the competition for students between schools and colleges affect outcomes and students' welfare. We also show that, simply by observing which school a candidate attended, colleges can "free-ride" on the information produced by a fierce competition between schools for those students. Finally, we show that although colleges make full use of the information contained in the school a student attended, the extent to which students can improve the college that they are matched to by going to a (less desired) high-ranked school is fairly limited.
    Keywords: information transmission,college admissions,screening,rankings
    JEL: C78 D61 D83
    Date: 2018
  4. By: Anne Van den Nouweland (University of Oregon [Eugene]); Agnieszka Rusinowska (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne, PSE - Paris School of Economics)
    Abstract: We provide a bargaining foundation for the concept of ratio equilibrium in public good economies. We define a bargaining game of alternating offers in which players bargain to determine their cost shares of public good production and a level of public good. We study the stationary subgame perfect equilibrium without delay of the bargaining game. We demonstrate that when the players are perfectly patient, they are indifferent between the equilibrium offers of all players. We also show that every stationary subgame perfect equilibrium without delay in which the ratios offered by all players are the same leads to a ratio equilibrium. In addition, we demonstrate that all equilibrium ratios are offered by the players at some stationary subgame perfect equilibrium without delay. We use these results to discuss the case when the assumption of perfectly patient players is relaxed and the cost of delay vanishes.
    Abstract: Nous fournissons une base de négociation pour le concept d'équilibre des ratios dans les économies des biens publics. Nous définissons un jeu de négociation d'offres alternées dans lequel les joueurs négocient pour déterminer leurs parts de coûts de la production d'un bien public et un niveau d'un bien public. Nous étudions l'équilibre parfait en sous-jeu sans délai du jeu de négociation. Nous démontrons que lorsque les joueurs sont parfaitement patients, ils sont indifférents entre les offres d'équilibre de tous les joueurs. Nous montrons aussi que tout équilibre parfait en sous-jeu sans délai dans lequel les ratios offerts par tout les joueurs sont les mêmes conduit à un équilibre de ratios. En outre, nous démontrons que tous les ratios d'équilibre sont offerts par les joueurs à un équilibre parfait en sous-jeu sans délai. Nous utilisons ces résultats pour discuter le cas où l'hypothèse de joueurs parfaitement patients est relâchée et le coût de délai disparaît.
    Keywords: stationary subgame perfect equilibrium,public good economy,bargaining game,ratio equilibrium,équilibre des ratios,économie des biens publics,jeu de négociation,équilibre parfait en sous-jeux
    Date: 2018–02
  5. By: Agnieszka Rusinowska (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne, PSE - Paris School of Economics); Akylai Taalaibekova (CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain, CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne)
    Abstract: We consider a model of competitive opinion formation in which three persuaders characterized by (possibly unequal) persuasion impacts try to influence opinions in a society of individuals embedded in a social network. Two of the persuaders have the extreme and opposite opinions, and the third one has the centrist opinion. Each persuader chooses one individual to target, i.e., he forms a link with the chosen individual in order to spread his own “point of view” in the society and to get the average long run opinion as close as possible to his own opinion. We examine the opinion convergence and consensus reaching in the society. We study the existence and characterization of pure strategy Nash equilibria in the game played by the persuaders with equal impacts. This characterization depends on influenceability and centrality (intermediacy) of the targets. We discuss the effect of the centrist persuader on the consensus and symmetric equilibria, compared to the framework with only two persuaders having the extreme opinions. When the persuasion impacts are unequal with one persuader having a sufficiently large impact, the game has only equilibria in mixed strategies.
    Abstract: Nous considérons un modèle de formation d'opinion compétitive dans lequel trois persuadeurs caractérisés par des impacts de persuasion (éventuellement inégaux) tentent d'influencer les opinions dans une société d'individus intégrés dans un réseau social. Deux des persuadeurs ont des opinions extrêmes et opposées, et le troisième a l'opinion centriste. Chaque persuadeur choisit un individu à cibler, c'est-à-dire qu'il forme un lien avec l'individu choisi pour diffuser son propre « point de vue » dans la société et obtenir l'opinion moyenne à long terme aussi proche que possible de sa propre opinion. Nous examinons l'existence et la caractérisation d'équilibres de Nash de pure stratégie dans le jeu joué par les persuadeurs avec des impacts égaux. Cette caractérisation dépend de l'influençabilité et de la centralité des cibles. Nous discutons l'effet du persuadeur centriste sur le consensus et les équilibres symétriques, comparé au cadre avec seulement deux persuadeurs ayant des opinions extrêmes. Lorsque les impacts de persuasion sont inégaux avec un persuadeur ayant un impact suffisamment important, le jeu n'a que des équilibres dans des stratégies mixtes.
    Keywords: social network,opinion formation,targeting,extreme and centrist persuaders,réseau social,formation d'opinion,consensus,ciblage,lobbying
    Date: 2018–02
  6. By: Hakan Genç (Department of Economics, Middle East Technical University, Ankara, Turkey); Serkan Küçükşenel (Department of Economics, Middle East Technical University, Ankara, Turkey)
    Abstract: This paper studies a sequential model of multilateral bargaining with a majority rule in which legislators can make decisions over both private and public good dimensions with endogenous recognition process. Legislators expend resources to be the proposer and make proposals about the allocation of private and public goods. We show that legislators can exert effort to be the proposer and make proposals in both dimensions depending on legislative preferences. Effort choices in equilibrium mainly depend on preferences over both distributional and ideological dimensions, as well as the patience level of legislators and the size of the legislature. We also show that in a diverse legislature, it may be possible to have distributive policies when the majority has collective desires or vice-versa.
    Keywords: Multilateral bargaining, majority rule, public goods
    JEL: C71 C78 D72
    Date: 2018–03
  7. By: Afacan, Mustafa Oğuz; Bó, Inácio Guerberoff Lanari; Turhan, Bertan
    Abstract: We evaluate the goal of maximizing the number of individually rational assignments. We show that it implies incentive, fairness, and implementation impossibilities. Despite that, we present two classes of mechanisms that maximize assignments. The first are Pareto efficient, and undominated - in terms of number of assignments - in equilibrium. The second are fair for unassigned students and assign weakly more students than stable mechanisms in equilibrium. We provide comparisons with well-known mechanisms through computer simulations. Those show that the difference in number of matched agents between the proposed mechanisms and others in the literature is large and significant.
    Keywords: market design,matching,maximal matching,fairness,object allocation,school choice
    JEL: C78 D63
    Date: 2018
  8. By: Brams, Steven; Landweber, Peter
    Abstract: We describe a 3-person, 2-cut envy-free cake-cutting algorithm, inspired by a continuous moving-knife procedure, that does not require that the players continuously move knifes across the cake. By having the players submit their value functions over the cake to a referee—rather than move knives according to these functions—the referee can ensure that the division is not only envy-free but also maximin. In addition, the referee can use the value functions to find a maximally equitable division, whereby the players receive equally valued shares that are maximal, but this allocation may not be envy-free.
    Keywords: Fair division; cake-cutting; envy-freeness; equitability
    JEL: C61 C72 I31
    Date: 2018–02–18
  9. By: Paulina Restrepo-Echavarria (Federal Reserve Bank of St Louis); Antonella Tutino (Federal Reserve Bank of Dallas); Anton Cheremukhin (Federal Reserve Bank of Dallas)
    Abstract: We endogenize the degree of randomness in the matching process by proposing a model where agents have to pay a search cost to locate potential matches more accurately. The model features a tension between an agent's desire to nd a more productive match and to maximize the odds of nding a match. This tension drives a wedge between the shape of sorting patterns and the shape of the underlying match payo function. We show the empirical relevance of the latter prediction by applying the model to the U.S. marriage market.
    Date: 2017
  10. By: Jorge Alcalde-Unzu (Public University of Navarre, Department of Economics.); Maria Gomez-Rua (University of Vigo, Department of Statistics and Operations Research.); Elena Molis (Department of Economic Theory and Economic History, University of Granada.)
    Abstract: We model a river as a segment divided into subsegments, each occupied by one region, from upstream to downstream. The waste is transferred from one region to the next at some rate t. Given that t may be unknown, Alcalde-Unzu et al. (2015) proposed the UR method to allocate the costs of cleaning a river in which each region pays the responsibility that it would have if t was its expected value. We prove in this paper that this allocation di ers from the expected responsibility of each region and propose and characterize a new solution, the EUR, that assigns to each region precisely its expected responsibility. We show that although this new solution improves the estimation of responsibilities, there is a trade-o in terms of incentive compatibility: meanwhile with the EUR solution it is possible that a region can reduce the cost allocated to it by discharging more waste, this could not happen with the UR. Moreover, the UR solution is, between the ones that do not have this problem in a general family, the solution that minimizes the bias with respect to the EUR.
    Keywords: Cost allocation; waste river; responsibility; incentive compatibility; characterization
    JEL: C71 D61
    Date: 2018–03–04
  11. By: Nobuyuki Hanaki (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur); Emily Tanimura (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Nicolaas Vriend (QMUL - School of Economics and Finance - QMUL - Queen Mary University of London)
    Abstract: We study a linear location model (Hotelling, 1929) in which n (with n ≥ 2) boundedly rational players follow (noisy) myopic best-reply behavior. We show through numerical and mathematical analysis that such players spend almost all the time clustered together near the center, re-establishing Hotelling's " Principle of Minimum Differentiation " that had been discredited by equilibrium analyses. Thus, our analysis of the best-response dynamics shows that when considering e.g. market dynamics as well as their policy and welfare implications, it may be important to look beyond equilibrium analyses
    Keywords: Invariant measures,Hotelling location model, Principle of Minimum Differentiation,Nash equilibrium, Best-response dynamics, Stochastic stability
    Date: 2018
  12. By: Jun-ichi Itaya; Chris Tsoukis
    Abstract: This paper investigates how the presence of social capital affects the externality arising from status-seeking preference as a parable for inefficient antagonistic behavior. It is assumed that the stock of social capital is accumulating through joint social interaction between rational individuals who are forward looking. Using a differential game, we show that although the presence of social capital mitigates the tendency of overconsumption over time, social capital ends up declining to zero. It is also shown that the benefits from social capital enhance the motivation of individuals to accumulate social capital thereby leading to deter overaccumulation and thus possibly improving social welfare.
    Keywords: social capital, status externality, Markov perfect, equilibrium, differential game
    JEL: O40 Q33
    Date: 2017
  13. By: Avdiu, Besart; Gruhle, Tobias
    Abstract: We show that information frictions can explain financial contagion without correlated fundamentals and explain why emerging markets are more susceptible to contagion. Costly information may cause investors to group country signals, because such imprecise signals are cheaper. These joint signals then cause asset prices to comove, which can be observed as contagion. Due to lower demand for country-specific information and lower risk weighted returns, it is likelier that investors group signals of emerging markets, thereby making them more prone to contagion. We find empirical evidence for our predictions using a novel data set on the number of joint news articles and exploit exogenous variation in news due to terrorism.
    Keywords: Financial Crises, Emerging Markets, Contagion, Information Choice, News
    JEL: D8 F30 G11
    Date: 2018–02–28
  14. By: Benjamin Tengelsen (Carnegie Mellon University); Ariel Zetlin-Jones (Carnegie Mellon University); Emilio Bisetti (Carnegie Mellon University, Tepper Schoo)
    Abstract: This paper re-examines the importance of separation between ownership and labor in team production models that feature free riding. In models of team production subject to moral hazard, conventional wisdom suggests an outsider is needed to administer incentive schemes that do not balance the budget. We analyze the ability of insiders to to administer such incentive schemes in a dynamic setting by developing a repeated model of moral hazard in teams. In our setting, after team outcomes are observed, a benevolent planner who lacks commitment has the opportunity to impose group punishments which do not balance the budget. We extend techniques from \citet{abreu1986extremal} to characterize the entire set of subgame perfect equilibrium payoffs and find that insiders are capable of enforcing group punishments when they are sufficiently patient. When these group punishments are enforceable, they are welfare enhancing for the team of producers relative to an environment where such punishments are exogenously restricted.
    Date: 2017

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